Transco assets now worth $2.6 billion

The National Transmission Co. (Transco) said the country’s transmission assets are now worth $2.6 billion or about P133 billion, up from the previous year’s assessed value of $2.3 billion.

The valuation or assessment of Transco’s assets were done by Sinclair Knight Merz (SKM) which said that the high-voltage transmission company is worth up to $2.68 billion if it is auctioned to private sectors.

Transco commissioned SKM, a consulting firm based in Australia to conduct an inventory and come up with an assessment of the state-owned firm’s assets.

Transco president Alan Ortiz said the results of the valuation will be the basis for determining Transco’s annual revenue requirement, maximum allowable revenue and the effective transmission service charges. It will also be used for accounting, divestment, and privatization purposes.

Ortiz said this is the company’s first valuation since its operations became independent of the National Power Corp. in June 2001 when the electricity reform law took effect.

"We are now worth more than we were before. In 1996, we were only worth $1.8 million. We will submit this valuation report to the Energy Regulatory Commission (ERC) for approval," said Ortiz. Transco last appraised its assets last year.

"Based on our official financial statement as of January to June 2004, our assets could amount to $2.3 billion or P128 billion," said Ortiz earlier.

Transco’s revaluation report is still subject to ERC approval. The report, which also included a thorough discussion on the valuation methodology segregating the transmission system, was submitted to ERC.

Ortiz said Transco did not make any revisions before the report was handed over to the ERC. He, however, said that the commission is empowered to make amendments.

"The whole report is subject to public hearings. The fine tuning will be done during the hearings. There may be some portions that may need to be refined, but we leave it up to the ERC to make the necessary changes," said Ortiz.

The SKM team collaborated with Cuervo Appraisers Inc. and Pricewaterhouse Coopers Financial Advisors Inc. to come up with a suitable valuation methodology for accounting and regulatory purposes and as basis for the transfer of the Transco assets to be privatized. The report also included details of replacement cost, depreciation and optimization.

The government will attempt anew to bid out the transmission assets of Napocor from end-2005 to early 2006, its third try since the first auction in July 2003.

PSALM (Power Sector Assets and Liabilities Management Corp.), the agency tasked to dispose the assets and assume the debts of Napocor, said the best time to privatize the Transco concession contract is when the ERC have determined the transmission revenue cap for the second regulatory period.

"Once the ERC has set Transco’s maximum allowable revenue (MAR) for the second regulatory period, bidders will be in a better position forecasting their prospective revenue streams. This will be valuable information for investors in preparing their bids as MAR will be the basis for computing the transmission rates that will be charged to electricity users," said PSALM president Nieves Osorio.

Transmission wheeling rates are the main revenue source for the private concessionaire of the electricity transmission operations. The transmission rates were first set by the ERC in 2003, the start of the first regulatory period. The second regulatory period was originally set on Jan. 1, 2006,but was moved to April 2006. Thereafter, it will be reset every five years.